TICKY FULLERTON, PRESENTER: Central Bankers are not given to exaggeration, so when they ring the alarm bells you had better take notice.

US Federal Reserve chief Ben Bernanke, who's thrown trillions of dollars at the American economy, told Congress the economy is in danger of faltering.

Across the Atlantic, Europe was dealing with the first banking casualty of the debt crisis and tonight the IMF called for immediate action to solve Europe's banking problems and a cut in interest rates.

BEN BERNANKE, CHAIRMAN, US FEDERAL RESERVE: The economy is close, the recovery is close to faltering.

PHILLIP LASKER: And part of the blame, according to the world's most powerful central banker, lies outside the United States.

BEN BERNANKE: One of the reasons that our recovery has been slower this year than it was last year is that we've faced a lot of financial volatility, and some of that is coming from the European situation.

PHILLIP LASKER: But according to others, much of Wall Street's volatility has been caused by a lack of political consensus between Republicans and Democrats acting on a vulnerable economy.

JOE FORSTER, CEO, FORTREND SECURITIES: So what you've got is a highly leveraged US economic situation, where any slowdown in the growth rate affects ... has a larger impact on your longer-term discounted cash flow analysis.

PHILLIP LASKER: But Wall Street staged an amazing near-400 point turnaround after clear signals the US Federal Reserve was ready to launch yet more stimulus. Across the Atlantic, markets fell amid some encouraging headlines and plenty of talk about modifying Europe's rescue fund to cover concerns about countries like Greece and vulnerable banks.

WOLFGANG SCHBLE, GERMAN FINANCE MINISTER (translation): A major concern is that the worrying development of the unrest in financial markets might escalate in a banking crisis.

PHILLIP LASKER: But that crisis could be in the making. French-Belgian bank Dexia is in trouble because of its exposure to Greece.

TOBIAS BLATTNER, ECONOMIST: In Europe, banks are putting more and more money overnight back to the ECB. That means the interbank market in which banks lend to each other - that one is not working any longer. So we are, in a way, back to the situation we had after the default of Lehman.

PHILLIP LASKER: So the governments of both France and Belgium are rushing to the bank's aid in the first bailout of a European bank in this latest debt crisis.

YVES LETERME, ACTING BELGIAN PRIME MINISTER: We want to guarantee the continuity of the banking activities of the Dexia bank in Belgium.

PHILLIP LASKER: Italy had its credit rating slashed by a second ratings agency, a move that eventually makes money more expensive for Italian banks. It all keeps global markets on edge, with most Asian markets lower today. Australia, beaten down heavily in recent weeks, went against the trend.